Since I joined the Realtors Property Resource organization in October 2015, I am no longer maintaining this blog.

I’ve left the articles online since many of them pertain to the project I’m working on for RPR called the Advanced Multi-List Platform (AMP). You can find out more information about AMP on the RPR blog at http://blog.narrpr.com/amp.

In May, 2015 the National Association of REALTORS® approved funding for RPR’s project AMP™ (Advanced Multi-List Platform) and Upstream™ (the broker controlled listing maintenance and distribution project to be built using RPR’s AMP technology). Shortly thereafter, the California Association of REALTORS® (CAR) convened another in their excellent series of Executive Roundtables to discuss both projects within the broader perspective of data sharing and MLS consolidation. The report of those discussions is a compelling read and offers insights from four of the premier thought leaders in our industry: Ann Bailey, founder of consulting firm Pranix; Robert Bailey, longtime Santa Cruz (CA) broker and past chair of many Realtor, MLS and technology vendor boards; David Charron, CEO of MRIS; and Dale Ross, CEO of RPR.

Panelists engaged in substantive analysis of what ails the industry and the appropriate course of action for addressing real estate’s data-sharing dilemmas. They delved into data management issues and the incongruity between advancements in technology and the industry’s outdated and restrictive infrastructure. Joel Singer, CEO of CAR, moderated the discussion.

If you are here looking for the four-part series I wrote about the RPR AMP project (Advanced Multi-List Platform) that NAR CEO Dale Stinton mentioned during the Association Executives Committee this morning, you are in the right place. Click on the link below to download the full set of articles.

The National Broker Public Portal announced appointment of its initial board of managers this week. In the press release they state that the project is designed to fill “an unmet need in the online marketplace.” Unfortunately, don’t define what that need is, leaving many readers still scratching their heads wondering “Wha??” Have these folks divined a gaping hole in the Zillow/Trulia product strategy and set about to fill the vacuum before anyone else sees it? With hundreds of listing portals and tens of thousands of agent and broker IDX sites, how could there possibly be any “unmet need” remaining anywhere? We shall see what that means.

In their earlier information releases, the group described the project as “the Creation of a National MLS Consumer Facing Property Search website.” Apparently it evolved to a Broker website in the past 30 days which is most interesting given that it is to be funded by MLS dues to the tune of somewhere between $1 and $3 per MLS subscriber per month.

The funding basis was made possible by a redefinition by NAR some time ago of what Basic Services are in MLS land. Basic Services now includes public facing MLS websites which can be supported by dues paid by ALL MLS subscribers even though they may compete with SOME subscribers and their brokerages. Interestingly enough, the larger brokerages and franchises fought this change heartily. In May, 2013, The Realty Alliance wrote a letter to the MLS Policy Committee stating, “… since we are not in favor of MLSs establishing public-facing listings display websites, we certainly do not favor leaving only the words, “establish or maintain” in the authorization to use our dues/fees/reserves as it is too wide an authorization. Significant dollars of ours could be spent “maintaining” these sites, including marketing and promoting these in competition with broker IDX sites.”

Bob Moline, President and COO of Berkshire Hathaway Home Services and the first name on the announced list of newly elected managers of the Portal, wrote at the same time:

We have no doubt, based on proposals and communications of others of which you are, no doubt, aware, that some want to use the fees and dues collected by MLSs and Associations to actively market public-facing sites. Such expenditures–and the public facing websites themselves–would put MLSs and Associations in competition with many of their broker-members, specifically their larger broker-members.

Therefore, we strongly suggest that the proposed new language on advertising specifically exclude the use of MLS of Association dues or fees to market public-facing website. (emphasis added)

Yet, that’s exactly what happened. Despite the protestations, the NAR Board of Directors approved the MLS committee’s proposed rules change and included MLS public facing sites in the definition of Basic Services. Now the Realty Alliance and other major brokers are backing the biggest implementation so far of the new policy.

Please don’t misunderstand — I am not accusing any of the major brokers of doing a flip-flop on this issue. It actually makes great sense for the brokers and major franchisers to back such a move, even though they opposed the rule change that made it possible. From their astute perspective, it is easier to manage one national MLS portal than 600-800 small ones. By imposing the Fair Display Guidelines (see below) from the top down, they need not fight the multiple skirmishes that would surely arise from a bottom up approach.

Much conjecture and critique has been levied at the project and it’s not even off the drawing boards yet. But in all that’s been written about the Broker Public Portal, one question has not been asked that I think needs to be addressed before it goes further.

One of the core tenets of the project is the adoption of the Fair Display Guidelines that the Realty Alliance developed back in 2012-13. Guideline number four states, “ No Ads For Other Brokerages Or Agents Displayed On Or With A Brokerage’s Listing” and goes on to explain:

Only the actual listing broker and agent may be displayed on the property details page. No ads from companies that may compete with a broker’s affiliated business such as mortgage, title, or escrow companies will be displayed on an individual property listing page.

So only the listing agent and brokerage will appear on property detail pages. Buyers’ agents, who by definition do not have any listings, will not be given any exposure at the “point of purchase” – the moment when a potential buyer has a question but perhaps doesn’t want to ask it of the legal fiduciary of the seller for fear of disclosing something about his/her negotiating position. Those buyers agents are members of the same MLS that is supporting the Portal; they are paying the same dues as the listing agents; and $1 to 3 of their dues payments each month are going to fund this portal project. Yet they get nothing in return? How is it that no buyers’ agents have asked the magic question, “What’s in it for me?”

If the average MLS subscription fee is around $25 to $28/month, then somewhere between 4% and 10.7% of the gross revenues of the MLS are going to pay for a Portal that benefits only the small minority of agents who actually take listing contracts. That seems grossly and unfairly lopsided. I’m surprised someone hasn’t challenged that model yet.

So far in Part 1 of our journey, we have examined the pressing problems facing the MLS industry.
In Part 2, we identified the source of those problems.
In Part 3 we proposed a solution based on a totally new architecture of the core MLS technology, the database that drives the entire interconnected system. Now let’s look at how we get to this solution.

The road map to success for such a dramatic change in the infrastructure of our industry will be fraught with peril and filled with potholes. But with a common purpose and diligent attention we can achieve success.

Throughout this project I have been encouraged by the open-mindedness of most of the major technology companies I have talked with in pursuit of this goal. But such a pursuit closely resembles the traditional chicken-and-egg paradox – which comes first?

Does a major MLS vendor take the first step, segregate its database and open it to developers with an invitation to cooperate in a larger pursuit? This has been attempted on a limited scale and has seen some modest success. FBS, itself a major MLS technology provider, introduced its Spark Platform some years ago but it has not captured the imagination of the vendor community at large.

The Clareity Store seeks to address the interoperability challenges between MLS systems through a common authentication linkage between systems and vendors but does not take on the challenge of common interfaces across all database systems.

No single legacy vendor has dared to take the first step of divorcing the database from the applications layer and opening the system to all developers without licensing costs. At the same time, no group of application developers has aggregated its product lines in hopes of enticing system vendors to open their systems. Short of the few inquiries I received initially, no MLS CEO has taken the bold step of actually notifying an MLS vendor that the MLS was aggressively pursuing this approach and would require the MLS vendor to cooperate or lose the market. No one wants to go first.

Now an industry consultant with no stake in the current MLS vendor field has proposed someone, some technology vendor somewhere, take the first step and create the open database into which a community of application providers can offer their products across a broad base of MLS operators. But that vendor will want to see a broader demand base of support before it would be willing to expend the time and effort needed to even reply to a request for proposal.

The key to cracking the eggs and hatching the chicks is to identify and induce a group of MLSs willing to take the first step and ask for the system to be developed. Fortunately, a couple of intrepid MLSs were willing to take that first step and with their committed inquiries in hand, I approached a number of technology vendors to see if I could find one willing to work on this project.

But I had some firm criteria that a database vendor needed to meet to be considered. An endeavor such as this could not be just two guys in a garage who thought they could do it. Here were my criteria:

It had to be a substantial company (read that as having resources, both financial and personnel, to actually do this) with a track record of aggregating data and managing a large, scalable database ;

It had to be a company with experience not just in handling MLS data but in integrating multiple other databases into a cohesive property-centric system; and

It had to be a company with minimal industry “baggage” — not a company to which the first reaction of most would be, “OH, NO, not them.”

That last requirement eliminated a number of the most likely candidates including the national portals as well as most of the major system vendors and all but a couple of public records providers. In an undertaking like this one, if a company had both lovers and haters, the stridency of the haters would probably overwhelm any attempt at honest debate and careful, logical consideration.

Fortunately I finally identified one company that met all my criteria but which I thought would, for reasons that will be obvious shortly, not be able to even consider getting involved. That company was the Realtors Property Resource – RPR – the subsidiary of the National Association of REALTORS(R) that has been successfully operating a national-scale property-centric aggregated database of real estate information for over five years.

RPR has a specific mission — to supply Realtor practitioners with technology tools and information that would allow them to further demonstrate their value to better serve their consumer clients by providing service that their clients could get nowhere else. Their product is spectacular. Those that use it love it and it has been steadily evolving and improving to the point where those who use it regularly feel they couldn’t do without it.

RPR was created through the acquisition of the Cyberhomes technical team and product base from Black Knight (at that time called LPS). With the team and the technology, RPR negotiated data licenses for many of the public records and other data sets that LPS had accumulated and continues to license that data today. RPR has direct data feed relationships with more than 600 MLSs, including 900 associations, representing over 865,000 REALTORS® and has already built the technology to facilitate sharing those data sets across any number of MLSs that have separately agreed to do so.

In my initial meeting with RPR, Dale Ross (CEO), Marty Frame (President) and Jeff Young (Chief of Operations) expressed one significant reservation about even considering this project. If RPR were to jump in, it might be very misunderstood by the rank and file Realtor as an attempt at a power grab by NAR — trying to create a National MLS and put all the locals out of business. Admittedly, such a scenario would be incredibly stupid for RPR to attempt because (a) they had contracts with hundreds of MLSs that prohibit them from competing to provide MLS services, and (b) many of the Realtor associations rely on income from their MLSs to provide other services to their Realtor members. Even though such a move would be political suicide, that fact alone would not be enough to keep some people from thinking there might be an ulterior motive. Conspiracy theories would abound and proponents of this new technology would be shouted down before they could even explain the benefits involved.

But if I were to come to RPR and ask them to respond to specific MLSs who have specific needs and are asking for help from RPR to meet those needs, well that would be a different story. If RPR were asked to repurpose technology that NAR had already invested millions of dollars to develop, and in doing so could create an alternate revenue stream for the company, the executives of RPR would be derelict in their management responsibilities not to respond.

And so I did. With RPR’s endorsement (and, full disclosure, their agreement to cover my time and expenses in this undertaking), I began contacting MLSs that were identified as strong potential partners, led by executives and leadership who were open-minded and forward-looking, leaders who would hear me out without shouting me down at the first mention of something new, different, challenging, but ultimately rewarding for all involved.

And that’s where we are today. We have eight MLSs from all over the country of various sizes and configurations to whom I have made this presentation and who have submitted letters requesting a specific proposal, in writing, to create the framework for this new technology. The response was great enough that RPR had to assign the project an acronym — AMP™ — the Advanced Multi-List Platform™.

It is critical to note at this point the name of the project is Multi-List Platform, not Multi-List Service. To quell any initial heartburn, let’s dispense with the elephant in the room question right up front. AMP™ is not designed or intended to replace an MLS – Multiple Listing SERVICE. It is designed to provide the technology that the Service uses as their core system – the database platform upon which the system is built and through which Service is offered. AMP™ is not an attempt to create a national MLS (a concept that, to my thinking, wouldn’t work anyway, but that’s another blog post). AMP™ requires no changes in rules, regulations, oversight, staffing, management, or governance. The business of the MLS and the people who manage that business remain the same – just the technology behind the scenes changes.

RPR is now working on proving the concept behind the theory, putting details to the general outline of this new advanced architectural platform. They will be working with the MLSs who have stepped up as the pioneers brave enough to journey into a new world of technological innovation.

What will be the result of all these efforts? How will the problems be solved and what can all parties expect as the beneficial result of this hard work? Let’s examine those questions.

The Benefits for all Players

Separating and opening the database will immediately make possible many new approaches to MLS operations, all of which will benefit the brokers, agents, the MLS, the MLS stakeholders, and the vendors who support all of them.

Vendors

For vendors, new markets will open into which they can sell their products and services. Gone will be the closed monolithic system where only the primary vendor in a market was permitted to offer services. With some slight modifications to conform to the data and schema standards and to use the APIs for access, the CMA module from an FBS system, the farming system developed by Paragon, the CRM system developed by Stratus, the prospecting and lead management system in Matrix all could run just fine on the new, open and accessible database. Third party, non-MLS system vendors would no longer be challenged to write new code for every MLS system that comes along or convert their products when the MLS changes system vendors. The database would be the same across all systems.

By opening the MLS, technology vendors will find more open markets, more agents available to buy their products, and more opportunity to increase revenue with lower development and support costs for the MLS provider.

Developers will also be able to get out of the business of aggregating MLS data in order to simply make their applications work.

Product marketers would be able to accomplish MLS integration much faster and easier since the API would be the same across all MLSs. Developers could write the code once and use it with equal facility in all installations.

Vendors would no longer be challenged to write new code for every MLS system or convert their products when the MLS changes system vendors or adds a new data field.

Mobile app developers would no longer be challenged to build a different application for every market.

Agents and Brokers

Agents and Brokers will find a new world of applications that were previously not available to them, and those that were available can be offered in a more palatable manner.

The days of an MLS providing one tool for all subscribers because the only way to acquire it at a reasonable cost was to buy it in bulk will be a forgotten memory. With an open MLS system, the role of the MLS changes from being the reseller of a bulk purchased service to the licensor of such a service that is then purchased only by those who want and need it. The major complaint that agents were being forced to pay for services they didn’t want or need, would be eliminated.

Further, brokers with already developed infrastructures could embed any search client or other “widget” or “plug-in” directly into their company’s intranet thus further enhancing agent loyalty and brand awareness. Once the RETS standard for updating transactions is completed and published, those same broker intranets could initiate and maintain listing records directly in the MLS database through an embedded listing maintenance widget. This would maintain the data integrity of the MLS while directly addressing broker demands for renewed control over the listing distribution process using Upstream or a similar management system.

Agent Benefits

Agents will have more choice in picking from a menu of applications that were previously not available or integrated with their MLS system.

Agents will be free to mix and match tools from different vendors to suit their needs and work styles.

Agents will only pay only for what each agent uses by subscribing to each of them individually.

An agent’s data stays synced wherever she goes, as she works across different applications.

Agents would find listing entry and update to be much easier and more streamlined. In a parcel-centric database with each physical property has only one record, thus eliminating duplicate or “refreshed” listings.

Broker Benefits

Brokers would no longer compete with the MLS in offering tools to agents because brokers can select which MLS tools are offered to their agents.

Brokers can now receive a single data feed or fully integrated applications from multiple MLSs in which they participate using the same platform.

Brokers with already developed infrastructures could embed any search client or other “widget” or “plug-in” directly into their company’s intranet thus further enhancing agent loyalty and brand awareness.

Brokerage intranets could initiate and maintain listing records directly in the MLS database through an embedded listing maintenance page or widget.

Any brokerage that wants to build its own applications can do so easily as authorized by license. If a brokerage operates across multiple markets the broker apps will be complete and work the same in all markets.

MLS and its staff

MLS administrators will find it much easier to meet their responsibilities for keeping the MLS’s biggest asset – its data – safe from marauders. Through judicious and automated data licensing processes and effective monitoring systems, the MLS can enroll tech providers at a record rate and offer subscribers an expansive library of apps while still maintaining control over the data.

The APIs used will pass only the data needed at that moment by that application. With few exceptions, the days of vendors needing to download the entire MLS database to make their products work will be gone.

Staff and Committee work that in the past has focused on product review and selection can be refocused on more productive activities. No longer would MLS leaders need to evaluate competing products in order to choose the best one for the entire market. Under an open MLS concept, all products that met the licensing requirements and conformed to MLS data rules could be offered equally in the market. The end-user, not the MLS staff or volunteers, would make the buying decision.

MLS Benefits

MLSs can easily bring products and services to their subscribers thus satisfying the demands of their brokers for choice on a platform that evolves in the future.

The MLS staff can meet their responsibilities to monitor data access and use, and easily cut access to offenders.

The APIs used will pass only the data needed at that moment by that application. With few exceptions, the days of vendors needing to download the entire MLS database to make their products work will be gone and with them the uncertainty about what the vendor would or could do with the data now in their possession.

The MLS can eliminate nearly all costs for providing IDX/VOW, as well as removing the need to rely on an outside syndication company to distribute data.

MLSs will no longer have to purchase tools in bulk because that was the only way to acquire them it at a reasonable cost.

Since public records and tax data are integrated with property listings in a parcel-centric paradigm, licensing costs are reduced.

Automated licensing processes allow the MLS to offer a broad library of apps, while maintaining strict control over the licensees.

The simplified licensing process will allow the MLS to set up many more vendors more quickly, thereby providing more sales options and the opportunity for more revenue streams.

By eliminating competition between proprietary MLS system vendors, there will be no more MLS conversions – ever. The nightmare of retraining the entire membership on a new system will end.

Authorized applications do not need to be supported technically with data feeds, greatly reducing the support costs to maintain and manage those feeds.

In the “pay only for what you use” scenario, site licenses would no longer be practical or desirable. Agents would subscribe to and pay for each piece of the system they want to use.

MLSs will increase compliance and improve data integrity. A single property record, with nearly all of the required fields already resident, will eliminate most typographical errors since new data entry will be minimized.

Association owners

For associations thinking about a future merger with another association, this structure offers much flexibility.

Combining the two databases of merging MLSs on the same platform and using the same structure is a non-event.

On the other hand, having a common database may negate the need to consider a merger. Overlapping market disorder is a thing of the past and with it went one of the more compelling reasons boards consider merging.

All of the systems on the common database platform could maintain their local culture and integrity by simply sharing data with subscribers of neighboring MLSs.

System sharing could be with or without an accompanying offer of cooperation at the option of each MLS. The association and MLS could still decide.

In the past year, RPR has introduced the concept of an open MLS platform directly to over 20 MLS chief executives and to industry leaders across the country through its RPR Advisory Council. The reaction has been overwhelmingly positive. AMP™ provides RPR an opportunity to continue and expand the RPR mission of supplying Realtor practitioners with tools and information that increase their value to their clients, while at the same time supplying much-needed innovation through technology and infrastructure to the MLS community.

In Conclusion (please, hold your applause)

Is this a change in direction for RPR or just a logical extension of their current mission to be a national technology solution provider? The answer is that RPR’s AMP™ project is the logical extension of the mission and purpose RPR is already fulfilling. It is an extended use of the formidable technology and infrastructure RPR has already developed.

I am hopeful that in the months to come RPR will be able to demonstrate that the ideas of the MLS tools of choice, of universal standardized data access, and of the menu of services approach to providing MLS applications to agents will prove to be a real possibility and eventually a reality. I look forward to continuing to work with RPR as we journey down this path. If you want to come along, please let me know. I’ll keep you updated on our progress.

–

If you would like a printed copy of this series,
please click on the cover page
to download the full content in PDF format.

In Part I of this series we looked at the problems and challenges facing the MLS community of today.
In Part II we defined the problems in greater detail and examined the systemic and institutional monopolies that perpetuate those problems.

In this installment we will look at a possible solution, one based in technology not in governance or management/ownership structure, one that presents benefits for all parties in the MLS ecosystem.

The Proposal

The climate is ripe for innovation in the MLS technology industry. Advances in data storage capacity, exponential increases in interconnection speed, the advent of the “app store” approach for mobile devices, and the growth in services that compete with the MLS for the agent’s attention and tech-spend all point to an urgent need to redefine the traditional vendor-MLS relationship.

The industry has long dreamed of a method whereby the MLS, and subsequently its subscribers, would not be hamstrung by the need to select a single vendor, one that controls not only the database but also all of the applications that use the database. Under the moniker of “front end of choice,” the industry has pursued standardized data definitions, query/response methods and transport protocols.

The concept of an open MLS that would allow any number of user interfaces (front ends) is not new. It was discussed as long as 15 years ago when I was still a novice product manager at Interealty Corp. (later to become part of CoreLogic after multiple ownership changes). The concept was revisited in 2008 when Saul Klein (then of Internet Crusade, later Point 2 and points beyond 2) published his MLS 5.0 manifesto. In his paper, Saul said the new MLS must be “open, collaborative, self-organizing and self-policed.” He added, “MLS needs to redefine itself from a purely business-to-business network tool to a marketing facilitator for its participants and subscribers. It needs to take advantage of its assets and shift its paradigm from (just) information about what is for sale to information on all property whether for sale or not.”

Seven years later, the concept remains unfulfilled. In the absence of advances in MLS technology, others have stepped in to fill the vacuum. National websites that combine listing data with property data, demographics, lifestyles, and user generated content and ratings have proliferated. But the MLS world now has an opportunity to catch up and take the lead in a big way. The stars are aligning and many pieces of the puzzle are starting to fall into place.

Data Standards – Finally

Progress has been slow, but lately great strides have been made by the Real Estate Standards Organization (RESO) in codifying data norms through the Real Estate Transaction Standard (RETS). RETS has been used for years to standardize the way data is distributed from the MLS to licensed recipients. Now, through adoption of the Data Dictionary and the pending release of the RETS-API, RESO is pushing the industry toward more internal standards and therefore more interoperability.

A few MLSs have gone so far as to embrace the RETS Update Transaction that will allow brokers to upload (and maintain) listing records into the MLS from the Broker’s intranet, rather than the MLS’s front-end interface. This transaction standard has made possible the much-anticipated Upstream project, which will (as best we understand it at the time of this publication) aggregate new listings from participating brokers and feed them TO the MLS (as well as to other syndication destinations) from the broker’s back office, rather than the reverse. Upstream has the potential to be the first, and most widely used, front end of choice for a new generation of MLSs willing to embrace it.

The nation’s largest MLS, California Regional (CRMLS), has already announced they are ready to receive the listing input feed from Upstream, using technology supplied by Atlanta based Bridge Interactive Group. The time is right to explore how much farther we can push the standards and how much closer we can get to achieving not just front end of choice but ALL tools of choice. A change in backend database architecture opens a whole world of possibilities.

The Open Database concept

In order to facilitate greater technological innovation, the industry needs to overhaul the current system starting with the database and get rid of the legacy of closed proprietary repositories. Technology has advanced to the point where keeping the database proprietary and inaccessible is no longer necessary for a well functioning integrated system.

By separating the database (the back end) from the other elements of the system (the front ends) and opening access to the database through a collection of application program interfaces (API) and software developer kits (SDK), by contributing the APIs to a common-good licensing system and the software code that drives them to an open source repository, access to and open use of the database would be available to any technology partner with whom the MLS enters into a license agreement.

In such an environment, the database remains the core of the system. But it is not inextricably linked to a fixed set of front-end applications, those tools that an agent uses to do business. Any tool, written by any developer, that follows the published guidelines for access and connectivity (the open APIs) could query for data and receive back, in real time, from a live database, exactly the data that it asked for and nothing more. Just think of the possibilities:

Agents could choose from many different versions of core MLS functionality by picking from a catalog of Hotsheet apps, CMA apps, Buyers’ Tour apps, and on and on. Agents pay only for what they use, and in many cases (certainly not all) lower their monthly fees.

Most of the broker complaints listed by The Realty Alliance would/could be addressed.

Products and services are unbundled and open to free selection

Products that compete with a broker’s service could be masked from agents in that firm

Data feeds would be standardized among all systems on the database

Broker back-office integration would be greatly simplified

Minimal downloading would mitigate most data piracy

MLS conversions would never again be needed. Instead of changing the whole system to get new functionality for its subscribers, the MLS would simply license new application providers. The marketplace would sort out the good from the bad.

Data downloading and synchronization would be a thing of the past.

Data distribution management would be all but eliminated because except in a few large-scale cases the applications would not download all the data from the MLS.

The ramifications and possibilities that follow this initial step are myriad, complex and full of potential. We will discuss some of those later in Part IV of this series, but first we need to get past the initial obstacles to this concept.

Previous roadblocks to progress

Why has no one tried this before? There are many reasons, some large, some small, but all difficult to overcome.

Finances

No MLS vendor or MLS operator has the financial wherewithal (either resources or incentive) to create such a new ecosystem from scratch. Many are hard pressed to keep pace with the massive financial investments being made by the online portals that they see as a major competitive threat, let alone divert more funds to a speculative and potentially disruptive venture. The costs of such a start up, with no guarantees of a return on investment, are simply too large and too risky for any single entity to take on.

Politics

As with nearly everything else in the MLS business, politics play a major role. Vendors do not want to alienate their current customer base in the pursuit of larger opportunities. MLS executives are already fearful of job security in the face of growing pressures to consolidate and regionalize. Elected leadership is most comfortable keeping the ship on an even keel during their short term in office, rather than charting new waters in Oceania Incognito. No one wants to take the first step or even make the first suggestion of stepping out in a new direction.

In doing the research for this project, I spoke with many MLS leaders, both vendors and CEOs. Without exception, all were intrigued by the concept but almost every one of them on both sides of the equation expressed fear of going first, of even being the first to publicly express interest.

[cryout-pullquote align=”right” textalign=”right” width=”33%”]All (MLS CEOs I spoke with) were intrigued but no one wanted to go first. [/cryout-pullquote]

I also spoke with a number of technology companies that might be able to provide some of the pieces of the puzzle, the elements that would be necessary to complete the entire deconstruction and reassembly of a new system. All (except for one we will discuss shortly) that I spoke with felt they could make contributions. But like the incumbents, none of them wanted to be the first one tapped as a leading contributor.

Inertia

Objects and MLSs at rest remain at rest unless acted upon by an outside force. So said Sir Isaac Newton in talking about the first MLS. (Actually I think he was describing planetary orbits, but the concept is similar.)

MLS executives have plenty to worry about without some industry consultant coming along and telling them they should expand their horizons and think of a new way of structuring their technology base. The market is emerging from years of gloom and doom and as market activity increases so do the inquiries and complaints from competing practitioners. Rules violations have to be attended to. New complaints from large brokers about past MLS business policies come under fire. NAR considers new association charter requirements and the execs must determine the impact on their local membership.

But some proposals need to be considered, regardless of the noise competing for the executives’ attention. The future of their MLS and their industry rely on constantly moving forward and innovating, changing direction when needed and never remaining at rest. The inertia of the MLS of the past must at some point change or the MLS may perish.

The Proposal – What it is and how it works

There must be a better way. My research examined the current state of MLS technology and my conclusions posit a new technology structure that could address the current chaos to the benefit of all parties involved.

Such a proposal requires a reconsideration of the MLS at its very core – its underlying platform. I believe there is an opportunity to deconstruct the MLS, to separate user interface, business logic, and data layers of the platform into separate structures. Such deconstruction would enable the MLS to become far more open and flexible. It would create a framework for technological innovation and the opportunity for more choice by end users and vendors alike.

In order to open the architecture of the MLS, we must first break apart what has up until now been a closed, locked system. We need to split the database away from the applications that are used to access it, make it a standalone storage engine with all of the business rules but only the minimal structural rules and requirements needed to support real-time retrieval and management of the data.

At the same time we must create a tool set of Application Programming Interfaces (APIs) and Software Development Kits (SDKs) to allow access by any and all developers willing to conform to terms of a license and the established standard structure. Throughout this process we need to ensure that the database technology provider openly licenses the APIs through a common open-market system and makes them available to any and all interested parties at no charge. The primary database technology vendor must openly publish all the common source code needed by all applications through the APIs. These APIs allow development of a wide variety of new applications that can inter-operate against and across any database that is structured in the same open manner.

The deconstructed MLS also serves to minimize many of the conflicts between the parties in the industry today. In the process it would redefine the meaning of one of the continuing criticisms of the MLS – that it levels the playing field by charging large participants for the cost of supplying services and support to smaller ones. The new level field would present equal opportunities for all with equal access to the building blocks in a “pay only for what you use” economic model.

Such a dramatic shift in the technology landscape will not occur overnight. We will need to overcome the usual objections – this is too much; too new; you’re moving too quickly; not the way we’ve always done it. But baby steps now will help us reach the ultimate goal – not just front-end options but the MLS tool box of choice.

The philosophy behind the change

We anticipate not only a change in the technology used but a change in the philosophy behind an MLS database. Currently, MLS systems create a new data record for each and every listing contract entered into the system. This creates a considerable amount of duplicate data for record fields that do not change often (beds, baths) if ever (address, lot size). Most systems also auto-populate each new listing record with data stored in a public records (tax) system and do it again each and every time a property is listed. This increases the number of duplicate fields and the quantity of redundant data.

Property-centric database

The new system envisions a property-centric database structure with each physical property having one property record, whether or not it has ever been transacted through the MLS. When a broker signs a new listing agreement, 99% of the data needed to complete a traditional listing record will already be stored in that property record, subject to verification and update if needed.

To this property record, an agent needs to add only a few fields to “claim” the property (thank you Zillow!) and indicate that it is now actively for sale: list date (when the listing will show as for sale), Listing Contract Date (when the listing agreement was executed), List Price (asking price), the identity of the listing agent (which would be pre-populated based on the login of the person making the entry, but subject to modification if that agent is merely helping another), and the cooperative compensation offered to other brokers. Thus each new listing event becomes an edited change to the master property record, not a new record in and of itself.

At time of activation, the agent could, optionally, add new photos, a description of the property (remarks), private showing instructions to other agents, virtual tours, or any other marketing information needed. Later, the agent would be able to update the status of a listing as it moved through the sales process.

[cryout-pullquote align=”right” textalign=”right” width=”33%”]Each new listing becomes an edited change to the master property record, not a new record in and of itself.[/cryout-pullquote]

The history of any changes, additions, deletions of fields or data within the property record would be religiously maintained so that no data would ever be lost. It would always be available to the MLS administration for rules enforcement purposes and to authorized governmental oversight bodies, as required by law.

This system would practically eliminate the most frequent and most troubling “tricks” that agents try in an attempt to game the system for marketing advantage. Agents would no longer be able to deactivate a listing and add it again as a new record. There is only one record, with a history that shows such activity.

Agents would not be able to create duplicate listings for the same property in multiple areas or zip codes. There is only one record in one location. (There would be provision for multiple treatments of that property, for example showing it for sale and/or for rent at the same time.) And perhaps most important, having a single property record with 90% or more of the content standardized and unchanging from listing to listing would eliminate the vast majority of typographical errors since data entry will be minimized for each listing.

Overcoming initial fear

The first reaction from the MLS vendor community to such a proposal is likely to be fear and trepidation. Opening the database to “outsiders” would undermine the very foundation of vendors who have stood the test of time immemorial – or at least since the late ‘80s when the computerized MLS network became a reality. Vendors won’t stand for that.

Or will they? What if we could show that an open system could actually expand market opportunities for vendors, increase their customer base, and make them more money by providing more of their applications than the current system, and not only in those market areas that are under their “control”?

The model being proposed here is not unlike that of the app store developed by Apple and mimicked by Google’s Android marketplace, where an open operating system is available to any and all developers, including the current major vendors. This ecosystem has proven both wildly successful for developers and widely popular among the end users. Such success probably surprised even Apple, which since its inception had been a closed proprietary operating system – the exact antithesis of the IBM-PC system with an open OS and open arms to any and all programs written to it. Thus did Apple mature and build on the success of iPhone® with the introduction of iPad® and soon other iGadgets.

So we urge the vendor community to consider this approach with an open mind and contemplate the endless possibilities.

Vendor Reaction

In the course of my initial research I talked to a number of MLS vendors. I wanted to get their reaction to such a change in technology – was this a valid pursuit? Would it improve the industry and the participants equally, as I had imagined it would? Would they be interested in being considered as the principal technology vendor for such a project?

Reactions to these questions were wide and varied from mildly amused to wildly supportive. The smaller vendors who were struggling to compete were very interested in learning more. Medium to larger vendors were interested, but not too concerned that this might present a threat to their continuing business. And the one system vendor with great longevity and respect in the industry pooh-poohed the idea saying it would never work.

Having now proposed a radical transformation of the MLS infrastructure, our only task remaining will be to find someone to build it. Now that we have deconstructed the MLS, and proposed a path toward reconstruction and resurrection, we will complete our journey and identify a solution provider in Part 4.

In Part I of this series we looked at the MLS industry from a historical perspective, leading us now to a closer look at the particular problems the institution of MLS is facing.

In general, the problems the MLS faces today, that are not institutional, are strictly technology related and fall into two broad categories:

Lack of innovation

MLS systems are woefully inferior compared to other modern technologies. Compare today’s MLS system, used by licensed practitioners, to parallel systems in the investment community or the insurance industry, even the travel industry (both from the standpoint of those few remaining travel agents, but even more so from the consumer’s vantage point).

The lack of innovation isn’t the fault of the system vendors. They have been constrained by the downward pressure on pricing imposed by MLS operators demanding more and more but willing to pay less and less.

Lack of choice

The closed, single-vendor system in each market has stifled choice by agents, by brokers, even by the MLSs themselves. New main system entrants are effectively blocked from entering the market by the long ramp up times from inception to first contract — often years. Third-party application developers who might otherwise fill in the gaps in main system functionality are frustrated by the lack of standardized data layouts and the daunting task of licensing access from 800+ different system operators with different rules and contract stipulations.

Let’s look at each of those areas from the perspective of the major stakeholders – the brokers, the agents and the vendors.

As a broker

In October 2013, The Realty Alliance organization presented the MLS community with a list of “issues” they felt the MLSs had long ignored or refused to fix. They published their list through Clareity Consulting. Many of their concerns were tied to limitations in MLS technology:

Inability to unbundle products and services – one package, one price, fits all

Forcing brokers to pay for development of services that compete with their own

Selling services in competition with brokers who use similar services as a competitive advantage (leveling the playing field)

Subsidizing associations by overcharging for MLS services

Making agents and brokers pay for services they don’t want or need

Non-standard data feeds from contiguous MLSs

Lack of back-office integration to MLS functionality

Not doing enough to stop data piracy

As an agent

A real estate agent has a simple list of requirements: give me the tools to do my job and get out of my way. The unspoken expectation is that the tools provided would actually work together, and therein lies the rub.

According to a recent Inman News survey, a lack of integration among various agent tools was a frequent complaint about real estate technology.

Most agents said that at least some of the tools they use are integrated with each other, but which ones actually worked together varied quite a bit. Some involved the combination of two products, such as the MLS and a CMA tool. Many agents suggested that products leave much to be desired when it comes to integration.

“[There are] too many choices that do not work well together to provide seamless transactions for clients,” one agent said.

Another agent asked for a “true contract-to-close” system, combining lead generation, listing management and transaction management.

“All of our ‘stuff ‘ is either disjointed or takes a full-time, patient tech nerd to use,” an agent said.

Another agent lamented that they “waste so much time entering in [the] same information on different platforms.”

“I’d like all of them to work together. Email with CRM with Zillow with my website with the MLS and DocuSign,” an agent said.

The MLS vendors have no incentive at the moment to fix this problem, to bring together all the pieces of the puzzle onto a single development platform that would allow all of these ‘parts’ to contribute to a custom ‘whole’ as has long been wished for by agents across the spectrum. The holy grail of real estate technology, “front-end of choice” – the ability for data to be completely synchronized in real time, across all of an agent’s or broker’s applications, with each application allowing input, as well as the display of listing data – will never exist as long as there is no R&D money to develop it and no profit incentive to maintain it.

As a vendor

The institutional system of one vendor/one market creates one BIG problem. Under the current system, one vendor is picked for one market. Once selected, the vendor has a three-year (more or less) contract on that market and no other vendor can get in to offer competition for even a portion of the entire system because the databases are incompatible.

The database drives every piece of MLS technology because without the central data repository none of the peripheral applications can operate. But industry technology has been architected from its very inception to be a closed, proprietary database system with specific applications created by the vendor that operate only on that particular database. Nothing is interchangeable between vendors. This makes up somewhat for having been bargained down to or even below the breakeven point for the core MLS service, and creates some other advantages (speed, single point of support) – but they are far fewer than the disadvantages.

No interaction with main database

In the single vendor technology scheme, only applications built by the database provider will interact with that database because of proprietary access methods. Some third-party applications can use MLS data but only by exporting the data to the application’s data server or by downloading the data to the user’s computer. This adds an element of lost control and is a continuing concern for MLSs seeking to manage distribution of their listing data outside of the MLS-IDX-VOW-Broker-Agent-Client pipeline.

Changing systems nightmare

The single vendor system made changing MLS vendors a monumental undertaking requiring months of planning, training, parallel operation, and headaches. Every agent must learn a new system and do so in a fairly short period of time while trying to maintain a continuing book of business. Consumers easily jump from one portal site to another with no training whatsoever, but ask a group of agents to change from one MLS system to another and you have a six-month training program to roll out while simultaneously handling the storm of social media protest on Twitter. It’s insane.

Because the two MLS vendors never use the same database structure or field specifications, data conversion from one to the other has been a nightmare. Somewhere along the process, data is nearly always lost, either because some data is impossible to convert (saved searches in one system don’t work in the other; the contract manager of one doesn’t export data in a form that can be read into the other; or templates for presentations and email campaigns all lost) or because there was just no place in the new database to put the old data. The industry is rife with horror stories of MLS conversions having gone badly. In the end, many ask if it was worth the effort. As much as an MLS may want a new vendor with shinier new baubles and beads, the pain and suffering involved in changing is a huge detriment to progress.

No new core players

The single-vendor system institutionalizes the current vendors and stymies new entrants with innovative ideas and newer, more versatile and competitive products from even trying to break into the business. Because most MLS contracts are multi-year, and vendors often try to renew them before the current term is up, it takes years for a new MLS offering to get into the vendor supply chain to even be considered. And in this business, no one wants to go first. So cracking the first contract is a huge hurdle. Finally, unless the new vendor is self-funded, they will find it hard to attract venture capital because the timeline from first investment to first contract and then to first profit can be five years or more, an eternity in the high-tech world.

Besides, in that amount of time the new product would probably be obsolete anyway.

No new applications developed

This structure also blocks independent application providers from entering. App developers quickly find there are just too many MLSs with too many data layouts and too much data to download and normalize to make their product work. While third party developers can offer products under a license that usually involves exporting data from the MLS because the primary vendor won’t allow an outside application to query the vendor database directly, no matter how much more efficient that might be. (That, of course, introduces other problems of distribution control and copyright management, but we won’t get into that right now.)

And let’s face it. Real time access through the RETS interface just doesn’t work fast enough to satisfy the ‘get it now’ mentality of most agents.

No profits

MLS vendors have not fared well in the current system either. Competition is fierce and MLSs are notorious for pitting vendor against vendor in a bidding war at contract renewal time to get the absolute lowest possible user fees, in many cases a price that produces no profit for the MLS vendor but may indeed be a loss leader for other portions of their business (e.g. data collection, aggregation, analysis, and derivative products). With vendor profit margins cut to the bone, one wonders why some of them decide to stay in this business. Yet with minimal margins, MLSs are quick to complain that those same vendors do not do enough R&D work to stay current with changing technologies.

Without profit the MLS vendors have had no money to invest back into product development, market research, usability studies, or technological innovation. Read any number of stories in any of the trade press and you’ll hear a constant theme – the MLSs are losing the beauty contest to the portals because of the lack of reinvestment into their core technology.

So the vendors aren’t making any money; there are no innovations coming out of their R&D efforts because there are no R&D efforts; and there are no new players coming on the scene to give them a reason to innovate. THAT is the perfect formula for disruption and disruption is exactly what I see on the horizon.

The Institution of MLS is in trouble.

I base this conclusion on the amount of turmoil that seems to be swirling around the MLS business lately.

The NAR Core Standards Initiative

NAR launched an initiative in the summer of 2014 to consolidate smaller associations into larger ones. The premise was standards of service that all AORs would have to meet to maintain their charter. Many small ones who cannot meet these standards by mid-2015 would risk being disenfranchised.

The small associations are now figuring this out and looking for alternatives to continue their existence. I’ve been getting calls from very small associations who think they can meet the core standards requirements simply by creating a regional MLS and letting the MLS carry the load of providing the services they need to comply. Such moves are not solving the core problem that core standards were meant to fix – small associations that can’t provide equitable Realtor benefits to all. They’re merely putting a Band-Aid® on the wound when it needs sutures. In the process of trying to improve the industry, the core standards are having the unintended effect of creating issues on the MLS side without fixing the main problem of small AORs.

I think it is highly probable that we will see a flurry of activity in May and June in small associations scrambling to meet the standards, and when they fail to do so, the AOR and its association MLS will shut down rather abruptly (unless, of course, some sort of extension or amnesty is offered).

MLS usage is dropping – pocket listings:

We started to see this phenomenon grow a couple of years ago and now it’s becoming more pervasive to the point where it’s been institutionalized in some MLS systems and ostracized in others.

Some MLSs felt the need to reinforce their relevance in the sales process so they embraced “Coming Soon” listings to offer subscribers a way to load their pocket listings and expose them to the other participants. Other MLSs created rules and penalties for such pocket business practices. This did little more than make some brokers angry because the MLS was now interfering in their business affairs.

The central issue of the Pocket Listing phenomenon is the desire, actually the demand, by agents and brokers to control where, when, and how their listings are not just advertised, but marketed and managed. The home seller hired the brokerage to facilitate the sale of the property as quickly as possible and at the highest possible price. They do not feel compelled to obey arbitrary rules set by a listing system that interfere with their professional opinion about how best to accomplish that sale. They feel if holding the listing off the market in order to expose it privately to a subset of buyers that, in their professional opinion, have a better chance of making an offer at an acceptable price before going to the general market, then they should be able to make that call.

Likewise, brokers take that requirement to a higher level, looking not just at individual listings but also at entire listing inventories. Should they put all their listings into the MLS if the MLS is not working in their best interests? Or should they collect their listings in their own private network and feed them to the MLS only when the MLS is ready to receive them – read: when the MLS will do business their way?

Thus the concept of Project Upstream was born. At its core, Upstream is a more organized, more widespread, more grown-up version of pocket listings.

It was conceived by brokers who were angry. And they’re not just angry about listings, they’re angry with a lot of stuff.

The Realty Alliance

We can all remember where we were in October 2013 when Craig Cheatham, CEO of The Realty Alliance (TRA) spoke to the CMLS convention in Boise about the growing unrest within the brokerage community. He detailed disillusionment brokers had with the lack of responsiveness from the MLS community in addressing their needs. He highlighted (and later published the list of grievances TRA had accumulated over the years. He gave the MLS community a deadline – “You have 10 days.” – to fix the problem or he/they would.

He disclosed Project Upstream, where the brokerages would combine their resources into a national aggregation that would/could displace the MLSs by reversing the flow of listing data. The members would share information with each other first, before sending it to the MLS. It is the “office listing” or “pocket listing” taken to a new level by having large companies involved and cooperating in the effort.

Listings would start on Upstream and then be distributed only to MLSs who complied with the brokers’ demands for more voice in governance. Upstream would also control the flow of listings to the portals (Zillow, Trulia – even <gasp!> Realtor.com) by distributing listings only to those that met their demands for display and lead routing.

It’s not just the TRA Brokers.

TRA is an alliance of non-franchise mega-brokers (although its complexion is changing with the expansion of the Berkshire Hathaway HomeServices brand). But Upstream is supported by not only the independents but also most of the major franchise brands. For example, at the annual KW Family Reunion, Gary Keller, CEO of Keller Williams threw up this slide in the middle of his keynote:

“What should have happened 10 years ago.” That’s how out of touch the head of the world’s largest real estate brand (by agent count) considers the MLS to be. And any MLS that thinks he’s talking about someone else should take a good look in the mirror.

Project Upstream, the broker/MLS co-owned public portal project, the syndication debate, the recently passed AVM data policy, etc. all point to deficiencies in the MLS system. The statement by Mr. Cheatham that his members no longer regard the portals as the main threat, but regard the MLS as the main threat, is easily understood in the context of the heightened awareness of these issues

The list goes on, but you get the idea. In Part III of this series we will look at how most of these issues can be addressed through a new approach to MLS technology.

Preface

Some of you may have noticed that this blog has been remarkably silent for the past eight months or so. That is not for lack of wanting to comment on happenings in our industry. I have had many thoughts and started numerous posts and then for reasons, which will become clear shortly, I set them aside unfinished or unposted.

For the past 18 months I have been busy working on a project. The subject of the project is not new — the evolution of MLS technology. The assumptions and proposals of the project are not novel — many were proposed years ago by others. The result of the project is not radical — an extension of current technology into a much broader application. Yet the project has the potential to revolutionize the MLS industry.

And the concept will be controversial. The stakeholders in all quarters will have opinions about the wisdom of such an approach. And the sayers of “Nay” might as well start sharpening their pitchforks now because I’m sure they will want to shake them at me in the near future.

But given a fair reading and an open minded debate, I think you will find the concepts I am going to relate here to be disturbing to some, interesting to most, and important to all.

My report will be in four parts.
First, a history of how this project developed and the research I undertook.
Part 2 will be a definition and deep dive analysis of the problem the project was designed to address.
In Part 3, I will propose a solution and explain why it makes sense.
And finally, in Part 4, I will look at the pros and cons of the proposed solution and, identify the people I think can provide that solution and look at the potential for the future benefits for all parties involved.

Let’s dive in.

Part I – The Historical Perspective – Background and research.

Summary of the state of the MLS industry

The real estate industry is in a state of flux. Competing groups from all quarters are converging in a conflict that will change the landscape of the infrastructure and it is expected to happen within a relatively short period of time.

At the heart of the conflict is the MLS, as it becomes a focal point for the serious discussions prompted by changes in technology and consumer behavior and a continuing effort by the trade associations that own the majority of MLSs to reestablish their relevance to their membership.

The MLS is being pushed and pulled in many directions, used as a pawn in the chess game between the Realtor associations and the brokerages who formed them and whom they were created to serve. The calls for reform in the practices of the MLSs to make them more responsive to brokerage needs are competing with calls for consolidation and merger to strengthen the existing MLS organizations by increasing their size and influence.

Such conflict is not new. But adding to the growing enmity among these players is the increasing influence of the consumer, particularly the self-service oriented Millennials and Gen-X-Y’s abetted in their pursuits by the growth and influence of the national real estate portals. Zillow in particular has been on a crusade to become the top -of -mind brand when a consumer thinks of anything related to the home buying or selling process, or real estate in general. And they’re succeeding, thanks to a world class marketing team and a seemingly limitless supply of advertising dollars.

I experienced first-hand the animus many MLS CEOs held toward Zillow during the 18 months I called on them as an employee of Zillow, seeking direct listing data feeds. The demands were many and the inclination to negotiate was practically nonexistent. But I consistently felt that the hostility was directed not at me personally or at Zillow as a company, but at an undefined, nebulous “threat” that the MLSs perceived coming from the portals in general. In the minds of some CEOs, the portals were threatening the MLS’s raison d’être by becoming the de facto marketing platform of choice for both agents and consumers.

Into this contentious environment, one MLS CEO made an unusual phone call in early spring of 2013. He said his MLS was about to begin the dreaded vendor selection process and he wondered if Zillow would be interested in being considered as the system provider for their MLS. He was working from the common perception that “Zillow is just one field away from being a national MLS.” Would Zillow like to add that field?

“No!” The answer was swift and resolute. Zillow had no interest in getting into the MLS business or even the technology business on behalf of an MLS. They held to their mantra they were a media company, not a broker, not an MLS, not a title company, nothing but an advertising vehicle for brokers and agents (and others) to reach a potential audience through pay per impression display ads.

That should have been the end of it. But ten days later I received a second call from another association executive asking the same question. I had no reason to believe these two people had talked to each other or compared notes. And I gave the same emphatic negative reply when asked the second time.

That spring, at the NAR mid-year conference in May 2013, I had lunch with both executives and talked in general about their frustrations with the current vendor options and their ideas for a different kind of MLS system. Their comments stayed with me even after I left Zillow some months later.

After Zillow, this newly minted industry consultant was invited to facilitate various strategic planning discussions for MLSs large and small. Many, I found, were wrestling with the same questions, looking for answers that would define purpose and mission for an industry seemingly at sea.

The MLSs were feeling pressure from many quarters.

Big brokers, including the major franchises, had launched a broadside against MLSs in general when in the fall of 2013 The Realty Alliance presented their demands for immediate industry reform — “or else.”

Agents and brokers expressed more frustration with the lack of innovation in MLS technology and pointed to the upstart portals as examples of what an MLS should look like. MLSs were seemingly talking to the wall if they asked for major improvements in their MLS system from their vendor. The MLSs had dug their own deep hole by playing vendors off against each other during contract renewal time, thus demanding and receiving the lowest possible price for service, sometimes near the break-even point for vendors. Without profits, vendors were at a loss how to finance innovation, research, and new development, while the MLSs who had selected them felt the backlash from their subscribers who demanded more.

Agents are irritated with the lack of professionalism in the industry and the influx of thousands of new practitioners who became licensed during the bubble and who were now just hanging on. They started pocketing listings, marketing them through peer networks on Facebook rather than submitting them to the MLS. Major chunks of inventory in some parts of the country were being sold off-MLS.

NAR through MLS rules adoptions and subsequent reversals of such rules were making it more difficult for MLSs to manage the playing field at the local level. The “Core Standards” initiative posed a threat to the charters of smaller associations. While many members would not miss their tiny association, agents would die without their local MLS that could wither with the demise of the association.

As I worked with the MLSs to dissect each of these problem areas, a couple of major trends showed through: most (not all by a long shot) of these problems resulted from either a lack of innovative technology to be able to solve the problem, or if such a solution were present and available then a lack of adoption of that solution by the MLS.

In Part II of this series, we will dig deeper into the challenges of running an MLS in today’s Internet age using systems developed during the first (sic) Clinton administration.

So why isn’t Rob handling his own follow-up promises? Well, he’s been kind of busy lately, being chased around by the Audubon Society for talking smack about Black Swans and other aviary oddities.

Plus, I recently attended the certification training for Core Standards Facilitators hosted by NAR in Chicago and came away with a renewed respect for NAR for taking on such a project and for the staff for figuring out all the nitty-gritty details that will need attending to in order to make this thing work. So these are my thoughts.

First, a little background.

NAR president Steve Brown appointed a PAG (presidential advisory group) to study how NAR could make itself, and its state and local associations of Realtors (AORs), better, more targeted to the mission of helping Realtors be successful in their businesses. The PAG report was published this past April and at the May REALTOR® Party Convention (and political rally, congressional lobbying party, and general governance meeting – oh, yes, and trade expo) the NAR board of directors acted on the recommendations by adopting the Core Standards by which all state and local boards will be measured.

Most of the criteria are going to fall into the “Duh, don’t we already do that?” category. But there are some sleepers in there that are going to keep some AOR CEOs awake at night. As you toss restlessly, keep in mind the ultimate purposes of this project:

KEY GOALS:

Every member receives services they deserve, regardless of geography or structure.

Every association contributes to the strength of the whole. Locals, state, national are all working together

Every association must be capable of delivering the standard services. Those that cannot now must find a way to do so or else.

Every association is highly functional and delivers member value – size is not the issue. Functionality is the goal. Small boards can be highly functional, while some large boards may not necessarily be that functional.

Despite what Dale Stinton told the AEs at their annual institute in Baltimore (as Rob reported his best recollection), the official line is this is not about culling the herd (of crappy boards) through mergers or defenestration. This is not just about getting rid of small boards (although everyone admits that the smaller the board the harder it will be for them to meet the standards tests). It is, instead, all about service to the members. Mergers may be a side effect, but if the service levels can be achieved without mergers at all, the Realtor mission will have been accomplished.

I was surprised to hear that many (hundreds) boards are so small they can’t afford one full-time employee. They exist solely to exchange listing information through an MLS that may be a PC on a modem line in the president’s garage. Those will be the first to die. Those that cannot make the grade on their own because of size, inefficiency, or just plain incompetence will have a number of options available to them short of termination with extreme prejudice.

They can fold into another board as a local chapter, thus keeping a portion of their local identity.

They can joint venture with other boards to share service costs and jointly present programs that meet the standards.

They can hire services to be delivered on their behalf, either from other AORs or outside vendors, although this might entail some increased costs.

What they cannot do is continue to slide by on good looks and charm. The days of the AE or board president cajoling the state AE in order to not have to meet the board’s RPAC quota are over.

Let’s take a closer look at each of the major areas and point out the highlights of the upcoming requirements.

Code of Ethics (COE)

My notorious friend jumps on his high horse about the lack of teeth in the Standards around the COE. Rob would like a Judge Dredd to go out and find those desperado Realtors, given them 48 hours to ‘splain themselves (even if their name isn’t Lucy) and then shoot them on the spot if they don’t straighten up, clean up, and fess up.

But the purpose of this section isn’t to force Realtors to be more ethical. It’s to make sure the AORs are doing their best to educate the members that (a) there is a COE, (b) they are expected to follow the COE, and (c) in cases where someone is harmed (whether that’s another Realtor or the general public), try to facilitate a resolution short of a full-blown professional standards marathon inquiry.

Through years of evolution and expansion, the Code of Ethics and Arbitration Manual is now over 250 pages long, chucked full of due process and rigor and quite frankly is a total PAIN to follow.

The three options, of which the boards much pick at least one, all intercept the complaint before it enters the formal ethics process. Mediation can resolve disputes in a short time. An ombudsman can intervene early and get the parties to negotiate a settlement even before mediation. And many states (NAR promises to publish details and examples) have a fine system in place that allows a member, when s/he gets caught with a hand in the cookie jar, to say a couple of hail Mary’s and a mea culpa, pay a fine and get back to business. The fines can be substantial and a couple of them should be a deterrent to further mischief. But if not, the board can still throw the manual at them later (which, at 250 pages, has got to be painful).

Advocacy

Just a couple of comments on this topic because for the most part Rob is right on in his analysis. Advocacy may be the saving grace for Realtor Associations, their raison d’être. Of all the services an association can offer, keeping good politicians in office and bad laws out of the books is the most noble.

NAR has put some substance around the metrics** of Calls for Action. They publish the response rates for each association and the Y-o-Y change so one can easily see the trend. My former state, Arizona, is dead last (8.8% response rate) among les États (there are a couple of territories and one District doing worse, but then there are a couple of territories with fewer members than the Black Hills, SD association with about 300 warm bodies, so we won’t pick on them until they grow up). But other states like IN, OH, NH, and VA have equally abysmal response rates, all 10% or less. Top dogs in the political arena are North Dakota (surprise) and Iowa (no surprise) with 32% or more responses to CTAs.

Funding Advocacy

The RPAC requirements are interesting as well. On the one hand AORs must include a voluntary contribution line on their dues statements, and in so doing imply that the payment of the contribution is anything but voluntary. Members can line-out that RPAC item and pay the dues amount only, but there is no requirement in the policy that requires AORs to explain this to the members. It will be interesting to see how those associations who accept only electronic on-line dues remittances handle the option to allow members to remove the RPAC amount from their “shopping cart” before they check out.

Yes, this procedure is an admission that most Realtors don’t understand the importance of strong, well-financed political action by their trade association. That’s the other part of the requirement, that the boards go further to explain, to educate the members why this is such an important part of the Realtor mission.** After all, this is why they changed the name of the spring meeting from Mid-Year Governance Conference to REALTOR® Party Convention. What remains unanswered, and prickly, is that end-around loophole. If the board doesn’t want to include the RPAC line item in the dues statement, they can just write a check on behalf of all of their members. But where does that money come from?

Unless the board has a for-profit subsidiary feeding money into a separate contribution channel, as Notorious #1 conjectured in his modest proposal <here>, then the check the AOR writes is coming from the same bank account into which dues dollars are deposited. And that co-mingling is the basis for separating out the RPAC item as voluntary in the first place. It will be interesting to see where the challenge to this comes from and how loud the screams are, or if the membership will look at this situation with the same laissez-faire “Meh” and yawn that greets most association political efforts.

Then there’s the POWER Thing.

Yes, the plan as first published (or at least first interpreted) smelled like a power grab by state and National, forcing locals into compliance or threatening them with termination either through dissolution or merger.

The truth is, and I saw this first hand in Chicago, the purpose here is not to consolidate power, not to cull the herd of weak Swanepoelian Wildebeests, but to strengthen the associations, and to align them at all levels toward the common purpose and Realtor mission – better, more productive members.**

Cajoling is just one option. Mentoring is preferred. The states can show the locals, and the national show the states, how to mobilize the membership and instill them a sense of pride in supporting the political actions of their PAC.

And therein lies another problem – whom do you support? And do your members agree with your decisions on whom to support? And if not, how do you either (a) do what the members want or (b) quit taking money from the Reds and giving it to the Blues (or vice-versa).

The better solution, in my opinion, would be some variation on Rob’s proposal to raise RPAC money not through voluntary donations but through unlimited corporate contributions allowed by Citizens United v FEC. But NAR isn’t ready to go there yet, so we’ll continue down this path for a bit longer, and work harder to explain it to the members.

These are just two of the six major areas that have detailed requirements for compliance. To quickly touch on the others:

Consumer Outreach

Boards must do four meaningful** consumer engagement activities annually, but can’t do the same thing four times. Examples are promoting market statistics and/or real estate trends and issues (e.g., release through press releases, interviews, etc. of MLS statistics, local market statistics, NAR research reports, local/state analysis of NAR statistics, etc.); promoting the value proposition of using a REALTOR® and/or engaging in community activities which enhance the image of the REALTOR®; engaging the public** in legislative/political issues that impact real estate and related issues; and organizing human assistance like a Habitat for Humanity** project or fundraising for the benefit of charitable/community organizations.

These are all pretty self explanatory and really easy to hit out of the park. Realtor associations love these kinds of activities, so no challenge here.

Technology

If you can believe this, there are some organizations out there that don’t have a website. The bar for what constitutes a website is pretty low (one page with links to state and national websites), so this hurdle should not be much of a problem. The Kansas Association of REALTORS® will sell you a copy of theirs for $45/month. If you don’t know your HTML from your URL or your DNS from your TLD, give them a call. And the AOR must use email (or some other internet channel like Twitter or Facebook) to communicate with members. My advice – stick with email. It’s free (Google) and verifiable.

Financial Solvency**

There were early concerns that locals would have to show the states their balance sheets to demonstrate solvency. Some locals don’t want the state association to know that much detail about which coffee can in the back yard has the buried cash. Fortunately, they will be able to keep their money under the mattress and free from state level prying eyes. The states will monitor only the reports from the auditors or CPAs about board financial condition and only from boards with $50K in revenue or more. (By the way, if your board has less than $50K in annual revenue, what in the heck are you paying your staff with? Bartered chickens?)

Unification Efforts

Here’s where it gets a bit tricky and where the CEO insomnia syndrome might set in. Unification refers to alignment of services at all three levels of the association, rather than to unifying boards, i.e. merging them, which is not the intent of this section. The particulars are designed to get the three levels of Realtorism to work in concert with each other, to compliment the other levels, avoid duplicate of efforts and ensure that services to which member are entitled are delivered regardless of which level delivers them.

AOR must have access to legal counsel**. This can be the state association in-house counsel or an outside attorney. But if you use an outside attorney, be sure it’s someone who understands your business. Realtor Associations are unique creations, unlike other businesses or trade groups. Representing one is not for the faint of heart. There is no requirement that you use the lawyer but if you need one you better have his/her phone number close by. There are firms that represent multiple associations across wide geographies. Contact me if you want some names.

AOR CEO, President (or Chair), and Treasurer must certify in writing they have been filed all necessary corporate docs, reports, and tax returns.

Board must have a business or strategic plan in place, including advocacy component.** The BoD must sign off each year that plan is in place (even if plan is for multiple years). This makes sense. As the Cheshire Cat once said, If you don’t know where you’re going “it really does not matter which way you go.” NAR has certified a whole cadre of strategic planners ready to help you put your plan together. <Click Here for the Roster>

Chief staff person must have minimum six hours of professional development each year. (Hold on to your passports small board CEOs – you don’t necessarily have to travel for this.) The state AOR must provide these opportunities which can be virtual web-based online classes that you can take in your jammies.**

NAR will survey members as to their understanding of the value provided by their associations at all three levels. Locals MUST promote these surveys.**

Locals maintain a list of LFROs and may solicit them for voluntary contributions to PACs.** What’s an LFRO you ask? That’s the acronym du jour for Limited Function Referral Organizations, those holding companies that brokers set up for their part-timers so they don’t have to pay REALTOR® dues. NAR would still like them to contribute to the RPAC even if they aren’t members.

State AORs must provide locals list of non-member licensees twice each year. The implication here is that the locals will then chase down the brokers of these agents to impose the dues formula on their non-member agents or force them to move the licenses to a non-Realtor holding or referral company. But the standard doesn’t require the locals to do anything more than they already are. It only requires that the state give them the list, not that they act on it. **

By now you have noticed a few provisions with double-stars appended and some of you have been sent looking for the footnote to which those stars refer. This is that footnote. Those provisions of the standards that are *starred* currently have no teeth. There is no measure of success, or of progress, against which to measure compliance. How does the state know if the local met the standard if there isn’t any scale by which to pass or fail?

That’s because there is yet one more missing piece to this puzzle. The PAG report tantalized you. The standards adopted by the NAR BoD enlightened you. The FAQs prepared by NAR staff enlightened you and clarified things. Now the missing fourth piece sure to raise your resistance if not your ire: the measurement criteria. NAR staff is still working on that. There are six squads of staffers putting together the “how much” to go with the “what” and the “why” and we hope to see their report soon.

Examples of missing measurement details:

What if you hold a town hall meeting to engage the public in political dialog, but one person shows up? Have you met the requirement of “meaningful” consumer engagement?

Yes, NAR publishes the Call to Action response rates, but what rate is sufficient for a state to pass the test?

If an AOR pours its heart and soul into educating the members about RPAC, and they still think it’s a lousy idea, has the AOR met the test of “explaining the importance” of the program? Explaining is not the same as persuading or convincing.

A bake sale to raise charitable donations is not the same effort as building a Habitat for Humanity house. Do they count the same under the community involvement test?

The financial solvency test has no guidelines. Will there be minimum reserves required? What happens if the AOR depends on MLS revenue more than it should? Is that acceptable in the eyes of the auditor?

Merely certifying that the AOR has a strategic plan in lace does not require the board to actually follow it. Does a ‘shelf registration’ count in meeting this test?

What constitutes professional development for the association CEO? Would a self-directed online Power-point lecture on Facebook for Dummies qualify?

That will surely be the fodder for Part 3 of this series, which I will probably bounce back to Notorious the Elder since by that time I hope to be on the road facilitating understanding and compliance. Either that or traipsing around in a shroud like Dr. Jack Kevorkian at Halloween passing out cyanide capsules to those miniature associations who are sounding the death knell after just reading the requirements and finding they don’t have much to offer beyond MLS. Don’t fret, small board AE or president. Instead of dying, you can become a Chapter of your larger neighbor and keep your name – just as soon as NAR defines what a Chapter is and the process for becoming one (coming soon, they promise).

I’m working on a website geared toward shameless self-promotion as an approved Association Merger Facilitator to guide associations and their MLSs through the process. I’ve got the shell and some bare bones information posted now. If you just can’t wait to get started and are interested in a quick one-day outside audit of your current status and what areas you might have to work on to pass inspection, give me a call. Contact info is found at www.NARCoreStandards.com. There’s also a link there for the current FAQ list from NAR that goes into more detail. That should get you started.

For this post:Cause – Our organizations are out of alignmentEffect – We must hang together or we will surely hang separately.

Inman reported on 4/30 that Redfin was going live in Las Vegas – going live, meaning they would have real agents with boots on the ground rather than relying on just one broker to give them a virtual presence in the market and access to the MLS. In a blog post entitled “Redfin and the Seeds of War” Brian Boero at 1000 Watt Consulting asked later that day why this was any big deal. After all, Redfin has had Vegas MLS listings on its site for four years by virtue of being a “Paper Broker” (I hate that term, but we’ll deal with that later), the industry invective for a referral model broker who doesn’t actually help buyers and sellers transact real estate purchases. Brian summarizes by stating the following:

Paper brokers get a license, tap into the MLS and drink from the cup of data direct from the source, whether or not the practicing brokers in an MLS are OK with it.

I have written about this issue before. Some brokers are concerned but worry about any sort of response for fear that the federal government will view such a response as anti-competitive. Others dismiss the issue as immaterial.

In any case, I believe this issue to be explosive, divisive and pregnant with the possibility of a war with much collateral damage.

(To his credit, Brian later posted a rebuttal from Glenn Kelman, CEO of Redfin, in which Glenn professes Redfin’s intention to pass through the “paper” phase to become a true, national electronic brokerage. Please reread Brian’s post for Glenn’s remarks if you haven’t already.)

Brian is exactly right on a number of levels but at the same time misses an even bigger explosive possibility.

First, a little history

Paper brokerages were a bane of existence to traditional brokers, their MLSs and their national association as far back as the middle ‘00’s. NAR took the DOJ inquiry into VOWs as an opportunity to squash Paper Brokers once and for all. The final settlement of the matter was published in May, 2008 and the definition of MLS Participant is in Exhibit B. The settlement that was reached included a provision that NAR demanded, that being a clear definition of “Participant” for MLS purposes. And the MLS purposes toward which the definition was crafted were to prohibit Paper Brokers from being MLS subscribers and getting access to MLS data without actually doing any brokerage. The definition reads:

“Under no circumstances is any individual or firm, regardless of membership status, entitled to MLS ‘Membership’ or ‘Participation’ unless they hold a current, valid real estate broker’s license and offer or accept cooperation and compensation to and from other Participants.”

The underlined words above replaced the previous language which read, “are capable of offering and accepting” cooperation/compensation. This change was further clarified in additional language which reads:

Note: Mere possession of a broker’s license is not sufficient to qualify for MLS participation. [Emphasis mine] Rather, the requirement that an individual or firm ‘offers or accepts cooperation and compensation’ means that the Participant actively endeavors during the operation of its real estate business to list real property of the type listed on the MLS and/or to accept offers of cooperation and compensation made by listing brokers or agents in the MLS. “Actively” means on a continual and on-going basis during the operation of the Participant’s real estate business. The ‘’actively” requirement is not intended to preclude MLS participation by a Participant or potential Participant that operates a real estate business on a part time, seasonal, or similarly time-limited basis or that has its business interrupted by periods of relative inactivity occasioned by market conditions. Similarly, the requirement is not intended to deny MLS participation to a Participant or potential Participant who has not achieved a minimum number of transactions despite good faith efforts. Nor is it intended to permit an MLS to deny participation based on the level of service provided by the Participant or potential Participant as long as the level of service satisfies state law.

The key is that the Participant or potential Participant actively endeavors to make or accept offers of cooperation and compensation[Emphasis mine] with respect to properties of the type that are listed on the MLS in which participation is sought. This requirement does not permit an MLS to deny participation to a Participant or potential Participant that operates a Virtual Office Website (“VOW”) (including a VOW that the Participant uses to refer customers to other Participants) if the Participant or potential Participant actively endeavors to make or accept offers of cooperation and compensation. An MLS may evaluate whether a Participant or potential Participant “actively endeavors during the operation of its real estate business” to “offer or accept cooperation and compensation” only if the MLS has a reasonable basis to believe that the Participant or potential Participant is in fact not doing so. The membership requirement shall be applied on a nondiscriminatory manner to all Participants and potential Participants.

Let me highlight a couple of key phrases that fall into the “CYA” category.

Not intended to preclude part time brokers/agents. OK, just because you have two jobs in order to eat, you can still be an MLS broker

Not intended to preclude those who have not achieved a certain number of transactions. OK, just because you’re an ineffective unproductive broker, you can still be in the MLS.

Not intended to preclude limited service brokers. OK, just because you’re too lazy to provide full service and you want to pop listings into the service and on Realtor.com for a couple hundred bucks each, you can still be in the MLS.

And finally, a broker who operates a VOW, and uses that VOW to refer out business to other brokers can still be in the MLS “if the Participant actively endeavors to make or accept offers of cooperation and compensation” (in addition to the referrals).

That last bullet was aimed directly at the paper brokers, most prominently ZipRealty (through their “Powered by Zip” network), RealEstate.com (then a part of Market Leader and now rolled up into the Trulia camp of companies), and Redfin (in those markets where they had not yet transitioned to a full brokerage model).

What has happened since?

So what has happened in the six years since the DOJ gave NAR and its MLSs the club they so desperately wanted and needed to attack the paper brokers and grind them up in the paper shredder of oblivion?

Nothing!

Absolutely Nothing!!

No broker that I know of has been expelled from or denied participation in any MLS because they failed the “actively endeavors” test. I am not aware of any MLS that has been so bold as to draft policy that defines the level of activity required to pass such a test.

ZipRealty continues with their referral network, adding more brokers on a continuing basis.

Redfin, as we see in this story, continues to expand unabated by such restrictions.

Trulia professed loudly when they bought Market Leader that they would get rid of their referral brokerage licenses and not compete with their brokerage advertisers. Trulia VP Alon Chaver told Inman News in September, 2013, “We are not an operating broker, and thus do not intend to use IDX data on RealEstate.com after the acquisition closes.” Yet Trulia still maintains brokerage licenses in 44 of the 51 licensing jurisdictions.

(Just to be sure this list was not just an extraneous page they forgot to take down from the website, I checked four west coast states’ real estate departments and licenses were still active in Washington, Oregon, California and Nevada. In fact, the Washington license was just renewed this past January 8.)

The RealEstate.com referral model previously came under the scrutiny of HomeServices of American and The Realty Alliance brokers a year earlier (August, 2012) which prompted the aforementioned and highly esteemed Mr. Boero to pen “Welcome to Crazy Town.” In that op-ed, he opined that the middle-finger salute Market Leader was flashing at the industry could intensify the cry for “broker owned portals, MLS apostasy and retrenchment.”

To take Brian’s “Seeds of War” theme and extend it with the help of man’s best friend (Arf) and a little Pink Floyd, “The dogs of war won’t negotiate. The dogs of war won’t capitulate.” If you think the road to apostasy has been paved over with forgotten memories paper brokers past, think again.

They were warned in 2012 when Market Leader bought Realestate.com. They were warned again when Trulia bought Market Leader. They were warned yet a third time when Realty Alliance CEO Craig Cheatham made his case to the CMLS conference in Boise this past October.

And my guess is the next warning will not be a shot across the bow. It will be through the head.

For this post:Cause: I shot an arrow into the air . . .Effect: It fell to earth right through my hair. . . (ouch)

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